28th Mar 2006 07:01
Babcock International Group PLC28 March 2006 28 March 2006 Babcock International Group PLC Pre-Close Trading Statement In line with its usual practice, Babcock International Group PLC ("Babcock" or "the Group") the support services company, makes the following trading statementprior to the close of its financial year on 31 March 2006. Babcock is pleased to reaffirm its statement made on 15 November 2005 that itexpects the full year results to 31 March 2006 to be ahead of its originalexpectations. At the interim stage Babcock reported a 21% increase inunderlying operating profit to £25.2m. Overall, good momentum has been maintained across the business. Our order bookis in excess of £2bn. Future revenue visibility remains high with major longterm contracts booked with, amongst others, the Ministry of Defence, NationalGrid Transco, Network Rail, Orange and Vodafone in the UK and the power utility,Eskom, in South Africa. Key features of the development of Defence Services in both 2006 and 2007 arethe Regional Prime East contract, which commenced on 8 March 2006 and theextension of the contract to manage Her Majesty's Naval Base Clyde. Lookingforward to 2007 and beyond, the contract award for the management of the RoyalSchool of Military Engineering, where the Babcock-led consortium is thepreferred bidder, is making progress and a timetable to reach financial closeshould be finalised later this year. This and the prospect of a positive resulton our bid for package 2 of the Defence Training Rationalisation contract offerthe potential for significant growth in this division over the next two years. The strong growth of our Engineering and Plant Services business in South Africahas continued throughout the second half of the financial year. Governmentcommitments on infrastructure spending and the continuing buoyancy of theresources sector underpin our confidence in the further growth of this business. We have made further progress in our strategy of expanding our range ofinfrastructure services and we are now at an advanced stage of negotiation forthe acquisition from ABB of their South African power lines division. We arealso pleased to announce the award of an £80 million contract from Eskom toprovide permanent on-site services for five power stations over a five yearperiod. We believe that further significant growth opportunities for Babcockexist in this and other areas of asset management in South Africa. In Rail, we reported at the half year that whilst activity in track renewal hadbeen strong, delays in the award of signalling contracts had held back overallgrowth. We are pleased to report that tendering activity in signalling in thesecond half of the year has continued to recover, which has led to both anupturn in delivered projects and in prospects going forward into 2007 for thisdivision. Track renewals work has also continued to perform strongly. The expected upturn in expenditure on both high voltage power transmission andmobile telephony networks has started to materialise, fuelling growth in ourNetworks Services business. Our positive assessment of the business cycle in theNetworks business, both in UK high voltage power transmission and mobiletelephony networks, at the time of the acquisition of Peterhouse in 2004 is nowbeing borne out. For example, in transmission, the value of tenders in thecourse of preparation for work to be performed in the financial years 2007/08and 2008/09 amounts to approximately £500 million whilst in mobile telephony,the rate of expenditure on network enhancement and 3G continues to accelerate. The performance of Technical Services, which represents less than 20% of theGroup's turnover, has been affected as anticipated by the current reduction inthe order book. However the longer term prospects for renewed growth at Rosythhave been underpinned by the Ministry of Defence's decision, announced in thesecond half of the financial year, to nominate Rosyth as final assembly andintegration site and primary block builder for the new aircraft carriers. Therewill also be extensive opportunities for Rosyth to compete for sub-contract workand our prospects of winning a significant portion of these contracts are good. Babcock has been in discussion with industry participants and with the MoD aboutvarious options for both submarine and surface ship support in relation to therestructuring of the UK maritime sector and fully supports this initiativeinsofar as it is value adding for Babcock's shareholders. These discussionshave not however extended to the possibility raised by VT Group and BAE Systemslast week of their jointly bidding for the Group. Babcock believes that such abid risks undervaluing both our successful support services operations and theexcellent long-term prospects of Rosyth. Babcock has not received any proposalfrom VT Group, BAE Systems or their advisers and shareholders are urged to takeno action at this time. We continue to make progress on the disposal of the non-core businesses withinPeterhouse which we acquired in 2004. In particular the loss-making IETG flowmonitoring business has now been sold. Disposals and good cash management haveenabled us to reduce net debt beyond our planned reduction targets and allowsignificant scope for further acquisitions, a number of which are already undernegotiation. Commenting on trading and prospects Gordon Campbell, Chairman of Babcock, said: "Babcock has been transformed over recent years into a successful and growingsupport services group, as reflected by the Group's share price performance,which has outperformed the FTSE All Share Index by 214% over the last fiveyears. Trading in the current financial year remains ahead of our originalexpectations and all of our markets offer substantial growth opportunities overthe medium term. The Board is confident of Babcock's prospects within thesemarkets and is convinced that the Group is well placed to continue to developand grow on an independent basis." The directors of Babcock accept responsibility for the information contained inthis trading statement and, to the best of their knowledge and belief (havingtaken all reasonable care to ensure that such is the case), the informationcontained in this trading statement is in accordance with the facts and does notomit anything likely to affect the import of such information. For further information please contact: Babcock International Group PLCGordon Campbell, Chairman 020 7269 7291 Financial DynamicsAndrew Lorenz / Susanne Walker 020 7269 7291 Notes to editors: About Babcock International Group PLC Babcock International Group PLC is an asset management business. We manage fixedinfrastructure and mobile assets. Babcock integrates labour, technicalcapabilities, systems and supply chain partners to meet the outsourcing needs ofcustomers for 'mission-critical' capabilities. In the year to 31 March 2005 sales from continuing business were £745 million.In June 2004 Babcock acquired the Peterhouse Group which brought; Rail andNetworks to the Group. The Group operates across five core business segments: Defence Services, supplying facilities management, equipment support andtraining services to the armed forces. Technical Services, providing engineering and logistical support to both thedefence and civil sectors in the UK. Engineering and Plant Services supplying design, installation and maintenancesupport to the energy sector in Africa and the US. It also holds the Volvofranchise for construction equipment in Southern Africa. Rail, providing design, renewal and installation services for the UK railinfrastructure. Networks, supporting the design, maintenance and renewal of power transmissionand cellular telecommunications networks in the UK. Babcock's head office is in London and the Company's shares are quoted on theLondon Stock Exchange in the support services sector (EPIC:BAB). For furtherinformation, please visit Babcock's website at www.babcock.co.uk. Dealing Disclosure Requirements Under the provisions of Rule 8.3 of the City Code on Takeovers and Mergers (the"Code"), if any person is, or becomes, "interested" (directly or indirectly) in1% or more of any class of "relevant securities" of Babcock International Groupplc, all "dealings" in any "relevant securities" of that company (including bymeans of an option in respect of, or a derivative referenced to, any such"relevant securities") must be publicly disclosed by no later than 3.30 pm(London time) on the London business day following the date of the relevanttransaction. This requirement will continue until the date on which the offerbecomes, or is declared, unconditional as to acceptances, lapses or is otherwisewithdrawn or on which the "offer period" otherwise ends. If two or more persons act together pursuant to an agreement or understanding,whether formal or informal, to acquire an "interest" in "relevant securities" ofBabcock International Group plc, they will be deemed to be a single person forthe purpose of Rule 8.3. Under the provisions of Rule 8.1 of the Code, all "dealings" in "relevantsecurities" of Babcock International Group plc by Babcock International Groupplc, or by any of their respective "associates", must be disclosed by no laterthan 12.00 noon (London time) on the London business day following the date ofthe relevant transaction. A disclosure table, giving details of the companies inwhose "relevant securities" "dealings" should be disclosed, and the number ofsuch securities in issue, can be found on the Takeover Panel's website atwww.thetakeoverpanel.org.uk. "Interests in securities" arise, in summary, when a person has long economicexposure, whether conditional or absolute, to changes in the price ofsecurities. In particular, a person will be treated as having an "interest" byvirtue of the ownership or control of securities, or by virtue of any option inrespect of, or derivative referenced to, securities. Terms in quotation marks are defined in the Code, which can also be found on thePanel's website. If you are in any doubt as to whether or not you are requiredto disclose a "dealing" under Rule 8, you should consult the Panel. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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